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Scratch another attack point off the list: No, employers are not dropping coverage due to ACA regulations

Sun, 03/22/2015 - 12:26pm

Here's another one of the "A-list" talking points that ACA critics have been lobbing for several years now: Supposedly, egregious regulations for employer-basd healthcare coverage would "force" thousands of large/medium-sized companies to drop their coverage entirely, throwing their employees over to the heatlhcare exchanges and taking the $2,000 per head tax hit for not providing coverage instead.

First of all, it should be noted that if this were to happen, it wouldn't necessarily be such a bad thing. The employer would actually save money, since that $2K penalty is actually a lot less than what they're already paying for the employees' coverage now. The employee would probably have to pay a higher cost for their private coverage...except that perhaps not, since a) employer coverage has been steadily increasing the employee's contribution to their coverage for years now anyway and b) the federal tax subsidies they'd receive via the exchanges would cancel out much or all of the increased cost anyway. In addition, by separating their healthcare coverage from their job, the "job lock" problem is also removed: They no longer have to worry about losing their coverage if they switch jobs...or even if they decide to become entrepreneurs on their own.

Having said that, this was still causing an awful lot of hand-wringing and scary proclamations by ACA opponents, and it was easy to do so before the employer mandate actually kicked into place.

Five years after employers were considering terminating health coverage due to costs and other issues related to the Affordable Care Act, companies have largely changed their tune as fears have not been realized, according to a new analysis.

Just three percent of employers are now likely to terminate health plans for active employees, according to Mercer, one of the largest employee benefits consultancies and a subsidiary of Marsh & McLennan MMC +0.61% Companies (MMC).

“The percentage of large employers that say they are likely to terminate coverage and send employees to the public exchange has fallen each year since the ACA was signed into law – from 9% in 2010 to just 3% in 2015,” Beth Umland, Mercer’s director of research for health and benefits, told Forbes. (See graphic below)

“Given that the penalty for not offering coverage under the ACA is far lower than the average per employee cost of health coverage – which hit $11,641 in 2014 – it’s not surprising that nearly one out of 10 employers saw terminating their health plans as a likely option back in 2010,” Umland added. “But in fact, virtually no large employers have jumped ship so far, and today few are even considering it.

Huh. Imagine that.

Now, there is one caveat here: The survey methodology ("572 employers, including 28 percent with fewer than 500 employees") doesn't specify which of those companies comprised the 3% who said they are dropping employee coverage. 3% of 572 is around 17 companies. For all we know, those 17 companies include monsters like Hewlett-Packard and General Electric, which employ hundreds of thousands of workers, which could theoretically mean that the hard numbers will be much larger than the 3% figure indicates. Somehow I doubt that, however...and besides, the survey says that those 3% are just "considering" or "likely" to drop coverage, not that any of them have actually done so yet.

Personally, I've never understood how the "employer = healthcare" mantra became so entrenched in U.S. society in the first place. Your auto insurance isn't generally tied to your employer. Your homeowner's insurance isn't. Life insurance usually isn't...so why healthcare? Still, it is what it is; close to 150 million people--nearly half the country--are set up with Employer Sponsored Insurance (ESI), so I suppose it's a good thing that this doesn't appear to be being disrupted too much for the moment.